The Ever-increasing Importance of the UK’s Manufacturing Sector

If we ‘don’t make anything anymore’, then how does the UK manufacturing sector account for almost half of our exports? How is it that 70 percent of the UK’s Business R&D is in manufacturing?

A new report has revealed the scale and importance of the manufacturing sector to the UK’s economic wellbeing. The True impact of  the UK Manufacturing report conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics reported that from economic prosperity and high-value employment to research and design, the manufacturing and operations sector is an absolutely vital sector, and at a high time it was appreciated for its unrivalled contributions to UK plc.

Within manufacturing, UK engineering companies alone directly provided just over one million jobs in 2016. This doubles to two million once supply chain impacts are included, equivalent to 6% of the UK total. In 2017, the manufacturing sector accounted for 10% of total UK economic output (Gross Value Added).  In March 2018 it accounted for 8% of jobs.

We spoke to  Laura Preston, Redline's Contract & Interim Manager on his views on the true impact of UK manufacturing on the economy. “There is a common misconception associated with the UK’s manufacturing sector that ‘we don’t make anything anymore” says Laura. “This is because manufacturing is less obviously present in our communities in comparison to ten years ago. Fewer people work in the sector than in previous generations and factories are seldom located in town centres any more. There is a tendency to believe that the manufacturing sector has declined to the point of irrelevance.”

“Nothing could be more-further than the truth: UK manufacturing extends to about a quarter of the economy. The manufacturing sector plays a significant role in the UK’s economy, selling products worth £546bn at home and overseas in 2016. The greatest source of demand for the UK manufacturing sector’s output is export sales. These accounted for 43% of the total – a considerably higher share than the UK sector average of 16%.”

What this means is that the manufacturing sector is vital in delivering an Industrial Strategy that can benefit the country’s prosperity. The misunderstanding that manufacturing accounts for only a small proportion of UK GDP tells you more about how GDP is calculated than it does about the true impact of manufacturing within the UK economy.

There are three aspects to assessing the impact of manufacturing:

• The direct impact: the output of businesses that are traditionally considered as manufacturers for the purposes of the GDP calculation
• The indirect impact: the economic effect supported in the supply chains of those businesses
• The induced impact: the effect of spending by people employed directly and indirectly in manufacturing.

The report looked at all three of these impacts. The first gives us the relatively familiar numbers; 9% of GDP and 2.6 million jobs (still bigger than the UK’s financial services!). However, the second and third elements give us real food for thought. Including the indirect impact, manufacturing accounts for 15% of the UK economy and more than five million manufacturing jobs.

When we incorporate the induced impact, the figures rise further to 23% and seven million manufacturing jobs. Those last two sets of numbers give a truer picture of the importance of manufacturing to the UK economy than the first.

What does this mean for the manufacturing jobs sector?

Bringing together the direct, indirect and induced impacts of manufacturing gives us a third way of estimating the impact of the manufacturing job sector. On this basis, we estimate that the total impact of manufacturing on UK GDP was £446 billion in 2016. For every £1 million that the manufacturing sector contributes to UK GDP itself, a further £1.5 million is supported across the wider economy through indirect and induced multiplier effects. On the same basis, manufacturing supported a total of 7.4 million jobs in 2016, which included manufacturing and operations, production and production engineer jobs, supply chain jobs and manufacturing engineer jobs.  For each job in the manufacturing sector itself, a further 1.8 are supported in other sectors of the UK economy.

In total, the engineering sub-sector contributed £188 billion to UK GDP and supported 3.1 million engineering jobs in 2016. The GDP figure includes the £67 billion that engineering companies contributed directly, plus £121 billion in indirect and induced multiplier effects. Just over one million people are employed by UK engineering companies, with a further two million manufacturing and engineering jobs sustained in the supply chain and as a result of workers’ spending.

Today, there is an opportunity, through the Industrial Strategy, to help the UK economy grow and boost our exports by fostering manufacturing investment to take advantage of industrial digitalisation and new technologies such as big data, artificial intelligence and additive manufacturing.

Redline’s Manufacturing Recruitment and Operations recruitment division specialise in the selection of both permanent, contract and interim professionals throughout the UK and Europe.  As the talent shortage continues, organisations must transform their manufacturing recruitment strategies and processes to attract and secure the best talent. Redline has undertaken research into candidate offer to acceptance ratios for many years. For a copy of our most recent research on the Offer Vs Declination Analysis, please click here. 

For more information regarding how we can help your manufacturing business, please contact  Laura Preston on 01582 878823 or email LPreston@RedlineGroup.Com